Correlation Between Christian Dior and Hermès International

Can any of the company-specific risk be diversified away by investing in both Christian Dior and Hermès International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Christian Dior and Hermès International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Christian Dior SE and Herms International Socit, you can compare the effects of market volatilities on Christian Dior and Hermès International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Christian Dior with a short position of Hermès International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Christian Dior and Hermès International.

Diversification Opportunities for Christian Dior and Hermès International

0.81

Correlation Coefficient

Christian Dior  Hermès International

Very poor diversification

The 3 months correlation between Christian and Hermès is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Christian Dior SE and Herms International Socit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herms International Socit and Christian Dior is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Christian Dior SE are associated (or correlated) with Hermès International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herms International Socit has no effect on the direction of Christian Dior i.e., Christian Dior and Hermès International go up and down completely randomly.

Pair Corralation between Christian Dior and Hermès International

Assuming the 90 days horizon Christian Dior is expected to generate 1.54 times less return on investment than Hermès International. In addition to that, Christian Dior is 1.04 times more volatile than Herms International Socit. It trades about 0.11 of its total potential returns per unit of risk. Herms International Socit is currently generating about 0.18 per unit of volatility. If you would invest  205,500  in Herms International Socit on October 22, 2024 and sell it today you would earn a total of  43,200  from holding Herms International Socit or generate 21.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Christian Dior SE  vs.  Herms International Socit

Christian Dior SE

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Christian Dior SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Christian Dior reported solid returns over the last few months and may actually be approaching a breakup point.

Herms International Socit

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Herms International Socit are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hermès International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Christian Dior and Hermès International

The main advantage of trading using opposite Christian Dior and Hermès International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Christian Dior position performs unexpectedly, Hermès International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hermès International will offset losses from the drop in Hermès International's long position.

The idea behind Christian Dior SE and Herms International Socit pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.